Why Cutting From Pell Grant Reserves Could Put the Future of the Program in Jeopardy

Each year, millions of low-income college students depend on funds from the Pell Grant program to help them pay for college. But inconsistent funding over time, coupled with threats in upcoming budget proposals are putting the future of the program on shaky ground, according to a new policy brief.

The Center for Postsecondary and Economic Success at the Center for Law and Social Policy (CLASP) claims in the brief that maintaining "continued, stable funding" for the program should be a focus for policies addressing poverty.

"Our nation's social safety net is meant to provide temporary supports to people at times when they cannot be self-sufficient," the brief said. "In America today, a person's chances of achieving permanent economic security for themselves and their families are slim without a postsecondary credential."

But funding for the program has not kept up with increases in other areas, the brief said, not only in college tuition and fees, but also in living costs such as housing, healthcare, and other basic necessities. The cost increases are more acute for college students, who are "doubly hit," the brief said. The more severe increase in the cost of attending college "leaves enormous gaps in low-income Americans' ability to afford the college credentials they so urgently need."

Lauren Walizer, who authored the brief, wrote that policymakers should make certain changes to better support the program and the students who benefit from Pell Grants, such as continuing providing the program with mandatory funding, raising overall appropriations caps to fully fund the program, and allowing the maximum grant award to rise with inflation.

Walizer also suggested that policymakers make the program's funding entirely mandatory. The program is currently funded through both discretionary spending (appropriated by Congress every year) and mandatory spending (set in law permanently). The majority of the program's funding comes from the discretionary side.

In recent months, the Trump administration, as well as lawmakers in Congress, have made moves to reduce the program's reserve funds. The fiscal year 2017 budget deal Congress passed this May included a $1.3 billion rescission of the program's $8.5 billion reserve funds. And a 2018 budget proposal currently moving through the House includes a $3.3 billion cut to the reserves – still lower than the Trump administration's proposed $3.9 billion cut.

Cutting from the reserves or eliminating the program's mandatory funding – an idea that has been floated in other proposals – could "severely destabilize the program," according to the CLASP brief.

"Taking funds out of the Pell Grant reserves would curtail the program's flexibility in the event of poor future economic conditions, sending it into a shortfall sooner than currently estimated or into an even deeper shortfall," the brief said. "In addition, it would foreclose the possibility of reversing previous harmful cuts … and of making needed program improvements to address student financial need. Such a cut would lead to a downward spiral like that experienced in previous years."

Eliminating mandatory funding for the program would leave a $7.5 billion gap to be filled in discretionary appropriations, which would reduce funding for other programs in the Labor, Health and Human Services, Education and other Related Agencies portion of the budget, the brief said. Alternatively, if lawmakers eliminated the portion of the Pell Grant funded by the mandatory funding (along with that portion of program funding), it would result in a lower maximum award.

Additionally, the maximum Pell Grant award in years to come will remain fixed at $5,920 unless Congress acts, the brief said, adding that a solution could be tying the maximum award to inflation. Otherwise, the program could "risk becoming irrelevant in the face of skyrocketing college and living costs."

"Ultimately, the Pell Grant program's financing is complicated because Congress has chosen not to fund it exclusively through mandatory funding, even though for all practical purposes, it operates as an entitlement," the brief said. "To continue the basic promise of Pell Grants –– that anyone who qualifies for Pell gets it –– the Trump Administration and Congress should reject irresponsible cuts and fully and permanently establish this crucial program to support educational and economic advancement for low-income Americans."

Publication Date: 7/18/2017

Michelle C |
7/18/2017 10:10:29 AM

Let's see -a multi-billion dollar gap that if filled would reduce other probable social welfare programs (that no doubt help our fellow citizens in need) - folks we've been here before - eliminate sub loans for grad students to pay for pell increases - {and that was when we had a democratic president!} we must resist ANY attempts to reduce funding and program stability. It should be clear the time for "negotiating" with current republican controlled branches of government is over -tomorrow's needy students are counting on us.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.